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FOR RELEASE, Friday February 10, 2006
PLANO, Texas – UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced full year 2005 and fourth quarter 2005 results.
Financial highlights from the full year 2005 include:
Fourth quarter financial highlights include:
· In the amounts presented above, the company has not made adjustments for the impact of deferred revenues written off in connection with the acquisition of the company and acquisitions by the company. These write-offs had the effect of reducing fourth quarter 2005 revenues by US$1.1 million and 2004 revenues by US$14.0 million.
“Today we celebrate our continued momentum and our first full calendar year as an independent company,” said Tony Affuso, chairman, CEO and president of UGS. “In 2005, we claimed the number one spot in digital manufacturing and solidified our cPDM leadership. With our victory at Nissan, a hotly contested multi-year battle, we underscored our superior CAx technology and relentless focus on customer satisfaction. In 2005, we also highlighted the mission-critical nature of Global Innovation Networks through our new corporate vision, and launched our game-changing initiative bringing PLM to the mid-market.”
Fourth Quarter Business Highlights
UGS’ business highlights in the fourth quarter included:
· Nissan selected UGS to be the provider of the new global PLM system that Nissan and its affiliates will deploy to design and build Nissan’s next generation of vehicles. Nissan will use UGS’ NXTM computer-aided design (CAD) software to digitally design its vehicles on a global basis and UGS’ Teamcenter® cPDM software to digitally manage product data and enable digital prototyping for all Nissan® vehicles across the world. The company will deploy the software as part of a fully integrated, common R&D infrastructure for use inside Nissan.
· Lockheed Martin Aeronautics Co. made the decision to deploy UGS’ Teamcenter® 2005 software, the latest version of the world’s most widely used PLM software portfolio, to manage all product data for its entire, multi-national F-35 Joint Strike Fighter (JSF) program. (see separate release)
· In the area of mid-market where, in 2005, UGS launched its UGS Velocity Series™ portfolio focused on delivering enterprise-level PLM technology to the mid-market, results included:
¾ Smart Engineering and Logistics Solutions Pty Ltd. (SEAL Solutions), a leading Australian defense contractor, standardized on the UGS Velocity Series portfolio, the industry’s first comprehensive, preconfigured portfolio of digital product design, analysis and data management software for the PLM mid-market. (see separate release)
¾ Mubea, a leading worldwide operating spring manufacturer, ordered more than 100 licenses of Teamcenter Express software. Teamcenter Express is the cPDM component of the new UGS Velocity Series portfolio. (see separate release)
¾ Teamcenter Express software became available to customers worldwide, fulfilling UGS’ commitment to bring PLM to the mid-market. Teamcenter Express helps companies transform their process of innovation by applying preconfigured best practices to everyday engineering tasks and processes. Teamcenter Express is the first mid-market offering to combine industry-proven digital product development with the unparalleled technology of UGS’ Teamcenter software, the world’s most widely used PLM portfolio and winner of the IndustryWeek magazine’s 2005 Technology of the Year Award.
¾ The English version 9.1 of Femap® software was shipped to customers worldwide. Femap is the finite element analysis (FEA) component of UGS’ new mid-market portfolio, UGS Velocity Series mid-market portfolio.
· Tecnomatix™ for Electronics Version 7 software, the company’s first integrated suite of digital manufacturing software solutions custom designed for the global electronics industry, was launched. Designated as “Version 7” to align it with the entire family of UGS’ Tecnomatix solutions, Tecnomatix for Electronics automates and streamlines all key product planning and execution processes enabling global electronics manufacturers to systematically enhance product delivery, cost and quality in an increasingly competitive industry and challenging regulatory environment. The Tecnomatix for Electronics suite combines several digital manufacturing software products previously offered by UGS as individual solutions for printed circuit board (PCB) assembly, final assembly and manufacturing execution.
· Teamcenter for MRO, the set of Maintenance, Repair and Overhaul (MRO) capabilities within the UGS Teamcenter solution, was launched. The solution provides a rich set of core functionality enabling management of product and process data applicable to commercial or military MRO operations and provides a proven framework for logistics data management. Teamcenter for MRO is designed to significantly reduce maintenance cycle time and costs associated with servicing complex products that require a significant capital investment, such as aircraft, weapon systems, ships and power plants.
· I-deas® 12 NX Series software, one of the company’s market-leading integrated CAD, manufacturing and engineering analysis (CAD/CAM/CAE) software solutions was made available during the fourth quarter. I-deas NX Series, along with NX 4, is part of UGS’ strategy to support a unified offering representing the world’s most advanced digital product development solution.
The company expects to realize revenue from the contracts highlighted above over multiple quarters.
UGS will host its year-end and fourth quarter 2005 earnings call with securities analysts live on the Internet at 10:30 a.m. Central time, Friday, February 10, 2006. Presentation slides will be posted on www.ugs.com at 8:00 a.m. Central time. See below for webcast/teleconference access information.
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About UGS UGS is a leading global provider of product lifecycle management (PLM) software and services with nearly 4 million licensed seats and 46,000 customers worldwide. Headquartered in Plano, Texas, UGS’ vision is to enable a world where organizations and their partners collaborate through global innovation networks to deliver world-class products and services while leveraging UGS’ open enterprise solutions, fulfilling the mission of enabling them to transform their process of innovation.
Note: UGS, Femap, I-deas, NX, Teamcenter, Tecnomatix, Velocity Series and Transforming the process of innovation are trademarks or registered trademarks of UGS Corp. or its subsidiaries in the United States and in other countries. Nissan is a trademark or registered trademark of Nissan Motor Co. Ltd and/or Nissan North America, Inc. in the United States and in other countries. Agile is a trademark or registered trademark of Agile Software Corporation or its subsidiaries in the United States and in other countries. BAAN is a trademark of SSA Global Technologies, Inc. or its subsidiaries in the United States and in other countries. All other trademarks, registered trademarks or service marks belong to their respective holders.
The statements in this news release that are not historical statements, including statements regarding our business, results of operations expected financial performance and other statements identified by forward
looking terms such as "may," "will," "expect," "plan," "anticipate" or "project," are forward-looking statements. These statements are subject to numerous risks and uncertainties which could cause actual results to differ materially from such statements, including, among others, risks relating to developments in the PLM industry, loss or downsizing of customers, competition, failure to innovate, international operations and exchange rate fluctuations, terrorist activities, acquisitions, changes in pricing models, intellectual property and losses of key employees. UGS has included a discussion of these and other pertinent risk factors in its registration statement on Form S-4 most recently filed with the SEC. UGS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Successor
UGS Corp.
Three months
Three months
ended
ended
December 31, 2005
December 31, 2004
Revenue:
License
$ 114,248
$ 101,006
Maintenance
134,575
107,062
Services and other
77,974
75,015
Total revenue
326,797
283,083
Cost of revenue:
License
6,052
6,275
Maintenance
14,094
14,620
Services and other
60,629
60,661
Amortization of capitalized software and acquired intangible assets
34,074
25,763
Total cost of revenue
114,849
107,319
Gross profit
211,948
175,764
Operating expenses:
Selling, general and administrative
107,491
105,383
Research and development
48,494
38,405
Amortization of other intangible assets
8,820
7,567
Total operating expenses
164,805
151,355
Operating income
47,143
24,409
Interest expense and amortization of deferred financing fees
(26,161)
(24,906)
Other (expense) income, net
(3,345)
13,881
Income before income taxes
17,637
13,384
Provision for income taxes
4,744
5,001
Net income
$ 12,893
$ 8,383
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Successor
Predecessor
UGS Corp.
UGS PLM
Solutions Inc.
Period of
Year
May 27, 2004
Period of
ended
through
January 1, 2004
December 31, 2005
December 31, 2004
through May 26, 2004
Revenue:
License
$ 358,986
$ 213,366
$ 100,780
Maintenance
504,189
237,610
163,012
Services and other
291,446
169,203
94,011
Total revenue
1,154,621
620,179
357,803
Cost of revenue:
License
21,213
13,768
7,163
Maintenance
56,411
32,842
21,177
Services and other
241,777
136,165
81,259
Amortization of capitalized software and acquired intangible assets
123,357
60,224
23,540
Total cost of revenue
442,758
242,999
133,139
Gross profit
711,863
377,180
224,664
Operating expenses:
Selling, general and administrative
420,873
226,282
136,817
Research and development
167,484
82,875
52,851
In-process research and development
4,100
50,819
—
Restructuring
1,774
—
—
Amortization of other intangible assets
34,147
18,365
2,500
Total operating expenses
628,378
378,341
192,168
Operating income (loss)
83,485
(1,161)
32,496
Interest expense and amortization of deferred financing fees
(97,737)
(55,314)
(2,021)
Other (expense) income, net
(17,671)
21,146
2,010
(Loss) income before income taxes
(31,923)
(35,329)
32,485
Provision (benefit) for income taxes
(9,857)
5,807
10,092
Net (loss) income
$ (22,066)
$ (41,136)
$ 22,393
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
Successor
December 31,
December 31,
Assets:
2005
2004
Current assets
Cash and cash equivalents
$ 61,532
$ 58,400
Accounts receivable, net
251,763
233,180
Prepaids and other
18,622
23,869
Deferred income taxes
26,471
62,890
Total current assets
358,388
378,339
Property and equipment, net
36,645
33,751
Goodwill
1,393,472
1,317,948
Capitalized and acquired software, net
464,994
435,816
Customer accounts, net
203,064
217,961
Other intangible assets, net
135,265
116,501
Other assets
39,623
42,696
Total assets
$ 2,631,451
$ 2,543,012
Liabilities and Stockholder’s Equity:
Current liabilities
Accounts payable and accrued liabilities
$ 159,976
$ 150,290
Deferred revenue
133,027
110,027
Income taxes payable
3,528
337
Current portion of long-term debt
—
5,000
Total current liabilities
296,531
265,654
Other long-term liabilities
48,511
41,011
Deferred income taxes
152,040
217,122
Long-term debt
1,212,046
1,049,623
Stockholder’s equity
Common stock, $ .01 par value, 3,000 shares authorized; 100 issued and outstanding at December 31, 2005 and 2004
—
—
Additional paid-in capital
1,005,991
1,005,479
Retained deficit
(63,202)
(41,136)
Accumulated other comprehensive (loss) income, net of tax
(20,466)
5,259
Total stockholder’s equity
922,323
969,602
Total liabilities and stockholder’s equity
$ 2,631,451
$ 2,543,012
Adjusted operating income represents operating income (loss) adjusted for amortization of acquisition related intangible assets, restructuring charges, and charges for in-process research and development. Adjusted operating income is not a recognized term under generally accepted accounting principles, or GAAP. Adjusted operating income does not represent operating income (loss), as that term is defined under GAAP, and should not be considered as an alternative to operating income (loss) as an indicator of our operating performance. We have included information concerning adjusted operating income because we use such information when evaluating operating income to better evaluate the underlying performance of the Company. Adjusted operating income as presented herein is not necessarily comparable to similarly titled measures. The following is a reconciliation between adjusted operating income and operating income (loss), the GAAP measure we believe to be most directly comparable to adjusted operating income (in thousands).
Successor
Three months
Three months
ended
ended
December 31,
December 31,
2005
2004
Reconciliation of operating income to adjusted operating income:
Operating income
$ 47,143
$ 24,409
Acquisition related intangible amortization
39,191
33,375
Adjusted operating income
$ 86,334
$ 57,784
Successor
Predecessor
Period of
Year
May 27, 2004
Period of
ended
through
January 1, 2004
December 31,
December 31,
through
2005
2004
May 26, 2004
Reconciliation of operating income (loss) to
adjusted operating income:
Operating income (loss)
$ 83,485
$ (1,161)
$ 32,496
In-process research and development
4,100
50,819
—
Restructuring
1,774
—
—
Acquisition related intangible amortization
150,789
79,560
13,135
Adjusted operating income
$ 240,148
$ 129,218
$ 45,631
EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to certain items that are required in calculating covenant compliance under our senior secured credit facility entered into May 2004. Adjusted EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense as described below. EBITDA and Adjusted EBITDA are not a recognized terms under generally accepted accounting principles, or GAAP. EBITDA and Adjusted EBITDA do not represent net income, as that term is defined under GAAP, and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow available for management or discretionary use as such measures do not consider certain cash requirements such as capital expenditures (including capitalized software expense), tax payments and debt service requirements. UGS Corp. considers EBITDA and Adjusted EBITDA to be key indicators of our ability to pay our debt. We have included information concerning EBITDA and Adjusted EBITDA because we use such information in determining compensation of our management and in our review of the performance of our business. EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures. The following is a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the GAAP measure we believe to be most directly comparable to EBITDA and Adjusted EBITDA (in thousands).
Successor
Three months
Three months
ended
ended
December 31,
December 31,
2005
2004
Reconciliation of net income to EBITDA:
Net income
$ 12,893
$ 8,383
Interest expense
26,161
24,906
Provision for income taxes
4,744
5,001
Depreciation and amortization
48,853
37,377
EBITDA
$ 92,651
$ 75,667
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA
$ 92,651
$ 75,667
Impact of revenue reduction resulting from purchase accounting (a)
1,103
14,010
Other items (d)
2,022
3,191
Currency translation impact (e)
2,996
(11,666)
Adjusted EBITDA
$ 98,772
$ 81,202
Successor
Predecessor
Period of
Year
May 27, 2004
Period of
ended
through
January 1, 2004
December 31,
December 31,
through
2005
2004
May 26, 2004
Reconciliation of net (loss) income to EBITDA:
Net (loss) income
$ (22,066)
$ (41,136)
$ 22,393
Interest expense
97,737
55,314
2,021
(Benefit) provision for income taxes
(9,857)
5,807
10,092
Depreciation and amortization
175,645
88,356
33,471
EBITDA
$ 241,459
$ 108,341
$ 67,977
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA
$ 241,459
$ 108,341
$ 67,977
Impact of revenue reduction resulting from purchase accounting (a)
11,348
40,924
—
Impact of in-process research and development (b)
4,100
50,819
—
Restructuring (c)
1,774
—
—
Other items (d)
8,243
9,373
—
Currency translation impact (e)
10,214
(16,578)
—
Adjusted EBITDA
$ 277,138
$ 192,879
$ 67,977
(a) Removes the purchase accounting impact for the adjustment to deferred revenue.
(b) Removes the impact of acquired in-process research and development that resulted from the acquisition of UGS PLM Solutions Inc. for the period of May 27, 2004 through December 31, 2004 and from the acquisition of Tecnomatix Technologies, Ltd. for the nine months ended December 31, 2005.
(c) Removes the impact of the restructuring charge.
(d) Represents the impact of management, consulting and advisory fees and related expenses paid to our parent companies and affiliates of each of our sponsors, as well as expenses associated with our retention incentive plan for certain members of management.
(e) Represents the net effect of unrealized gains and losses from revaluing the intercompany debt that resulted from the acquisition of UGS PLM Solutions Inc. and from hedging obligations used to offset foreign exchange currency balance sheet exposures
Mendi
Paschal
+1 972 987 3210
mendi.paschal@siemens.com
Doug
Barnett
972 987 3352
barnettd@ugs.com